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To The Moon: Is LCID Stock The Real Deal?

After reporting third quarter numbers, Lucid Motors stock saw its popularity jump on the main Reddit forums. Wall Street Memes takes a closer look at momentum in LCID.

Electric vehicle maker Lucid Motors  (LCID) - Get Lucid Group, Inc. Report has recently delivered third quarter results. The company reported significant balance sheet improvement and a substantial increase in customer reservations, despite reporting net losses of roughly half a billion dollars.

Figure 1: Lucid Air, the 2022 MotorTrend Car of the Year.

Figure 1: Lucid Air, the 2022 MotorTrend Car of the Year.

As one of the most popular tickers on some of the main discussion boards on the web, retail investors seem ready to take advantage of LCID’s momentum.

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Lucid Q3 post earnings review

Lucid’s Q3 EPS failed to beat consensus estimate, but investors probably care little about the bottom line at this point. More importantly, Lucid Motors’ management showed excitement in the first quarter since the SPAC merger. The highlights included higher customer reservations at 13,000, suggesting an order book of $1.3B. Peter Rawlinson, CEO & CTO of Lucid, said:

"We are tremendously excited by our accomplishments in our first quarter as a publicly traded company. We successfully began production of vehicles for customer deliveries, continued investing in capacity expansion of our manufacturing facility in Arizona, and opened new retail and service locations in advance of the Lucid Air launch."

The company boosted its balance sheet to end Q3 with $4.8B in cash (about 7% of market cap, for reference), following the reverse merger. Also, Lucid Air won the 2022 MotorTrend Car of the Year, which is considered "one of the most prestigious honors bestowed in the auto industry.”

Looking forward, the company sees significant demand for the award-winning Lucid Air, with accelerating reservations as production ramps up at Lucid's Advanced Manufacturing Plant in Arizona. Lucid is confident that 20,000 units in 2022 will be achieved.

Looking down the P&L, Lucid reported a net loss of $524.4 million in the third quarter. Since the company went public via SPAC, Lucid has lost $1.5 billion so far in 2021 on virtually no revenues.

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Lucid shows its credentials

Recently, Citigroup analyst Itay Michaeli has proven to be a strong LCID bull. He raised his share price target on the stock to $57 from a previous $28 that was much more modest. The price target bump came on the back of Q3 earnings that the analyst found solid, especially due to vehicle orders.

The analyst also appreciated Lucid Group’s confidence in delivering the 2022 volume target, as well as the Lucid Air having won the MotorTrend award. Q3 results showed the company’s credentials in the EV market, suggesting that Lucid could be a key player in the space.

EV stocks on fire

EV stocks have been on a tear recently. Price movements seem to have been driven mainly by news on the Tesla-Hertz deal  (TSLA) - Get Tesla Inc Report; Elon Musk’s never-ending tweets; and Rivian’s  (RIVN) - Get Rivian Automotive, Inc. Class A Report recent IPO that sent shares up more than 50% in the first three trading days.

Below is the recent performance of the three most popular EV stocks on the main online forums over the past few weeks.

Figure 2: LCID, TSLA and RIVN stock chart performance over the past month.

Figure 2: LCID, TSLA and RIVN stock chart performance over the past month.

A brief look at the EV opportunity

Third party research suggests that the electric vehicle market is expected to be valued at $725 billion by 2026. Currently, the industry is worth $171 billion, pointing at a compelling CAGR of around 30%. In unit sales, EVs are projected to grow from around 2.5 million in 2020 to about 11 million in 2025. At those levels, electric vehicles would account for approximately 32% of the total market share for new car sales.

Regulation and policy are still considered impor tant catalysts for the EV market. Asia is currently the fastest growing market. Meanwhile, sizable EV incentives exist in the Unites States, some countries in Europe and in Australia.

Lucid Motors is trying to take advantage of this growth opportunity. Despite supply shortage having impacted the EV business lately, increased demand and solid execution seem to be playing in Lucid Motors’ favor so far.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)